Crypto scalping: How to approach scalping cryptocurrencies if you're not a daytrader

By dtforce | businessofcrypto | 27 Apr 2022

Crypto scalping is a trading method where you buy and sell cryptocurrencies quickly to make a small profit, or a profit that is small percentage-wise.

Scalping is a trading style that is less speculative than day-trading, but still requires either skill or a good configuration for your bot. - It is simply a way to buy and sell cryptocurrencies quickly in order to make a profit from small price fluctuations. It may sound similar to day-trading, but there are some key differences that make scalping less orientated on speculation about future price action.

A big word of caution: In every scalping strategy, you are collecting small profits that stack over time. It is absolutely necessary to trade with a stop loss, because one greedy move can wipe out months of your patient work.

Two kinds of scalping strategies

There are two ways to scalp cryptocurrencies.

  • You can either use technical analysis to predict when the price will go up or down, and then buy and sell as the opportunity presents. Your entry and exit points are decided on the spot, when your indicators tell you to buy or sell.
  • Another way is to fix how much you want to make per trade, and then do many trades over a period of time. This second way is called grid trading or shadow trading, depends on how exactly you set up the boundaries of how much to scalp.

Crypto scalping can be difficult to do manually because you need to watch the charts all day to see when the price goes up or down.

But if you want to run a crypto scalping bot, you still need to have it well configured for scalping - that also requires you to know what you're doing. If you're not a day-trader, then this can be quite difficult.

That's where grid bots and shadow scalping comes into play.

Grids and shadows: Easier kinds of scalping for non-traders

Trading a flat grid is one way of scalping crypto that is great for non-traders.

Grid bots (paid)

Here's what that means: In grid trading, you identify a range on your market, and you buy the bottom of it and sell the top of it. Your stops are near the borders of a range.

Now the best part. There are commercial grid bots based on AI that do the range identification for you as well. You just need to provide the capital to trade with.

These bots are of course all paid: 3commas has a good AI grid bot, a more basic version can be set up with Coinrule (you'll have to identify the grid yourself).

Shadow system (free)

If you are a non-trader or a trader who doesn't work with technical analysis, but you want to run a crypto scalping setup for free, then you should consider the shadow trading strategy.

Shadow strategy or shadow system comes from forex trading. It is a scalping strategy where you scalp a fixed amount every day. That amount has to be worked out from a spreadsheet as it changes from market to market. - More on that here, including a sample setup on BTC and ETH markets.

The shadow grid has you open two trades each day: One long and one short. The idea is to capture market volatility, because when you think about it, markets never stay at the value at which they opened, and what's more, if you do a bit of digging you'll find that they usually move both up and down during different times of day each trading day.

So, the shadow system is the type of scalping where loads of your positions end up in loss, but overall you will make a profit... if you use a tight-enough stop loss. That's the only decision you have to make - no technical analysis, no news, no Elon tweets, no crystal balls and tea leaves.

This is a no-brainer setup that is easy to execute manually, or using Coinrule. I'm working on shadow scalping templates for FTX and Coinrule that I'll post probably on TradingView - I might come back to the comments here if anyone is interested.

An even bigger word of caution than the first one: The conflict in Ukraine may seem very distant from your own happy suburban 1-bedroom but be aware that macro conditions in Europe are awful, and in the US not much better. Turbulent times call either for thoughtful trading decisions of for good risk management. USE👏 A👏STOP👏LOSS👏

Written by Chris


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